the economics of north beach yard:

negotiations underway for culinary incubator

The North Beach Yard concept is getting real. A lease proposal allowing the culinary incubator to operate on one of the City-owned West Lots could be presented to Miami Beach Commissioners as early as next month and, according to financial projections, the benefits to the City could be substantial.

Based on terms outlined by City Director of Tourism, Culture and Economic Development, Eva Silverstein, the Commission’s Finance and Citywide Projects Committee this week authorized the City Attorney to negotiate a full lease. North Beach Yard co-founders include Della Heiman, founder of the successful Wynwood Yard, and Ken Lyon, who has worked with Heiman at The Yard and is the proprietor of the first full-service restaurant there.

The Wynwood Yard offers food and beverage entrepreneurs the opportunity to test concepts with a lower cost of entry by utilizing food trucks and pop-up materials on four vacant lots in the Wynwood Arts District. The food yard also hosts live music and other cultural activities, fitness classes, yoga, art, and gardening classes, all showcasing local entrepreneurs. A fifth vacant lot is utilized for a food garden. The co-founders have pledged to tweak the concept to meet the unique needs of the North Beach community.

Silverstein presented the financial proposal: An initial five-year lease with two, two-year renewable options. In the first year, North Beach Yard would pay $1 in rent with no proceeds going to the City. In the second year, the City would receive 2.5% of rental receipts received by North Beach Yard from the subcontractors, mostly food vendors, that will operate there and who will pay a management fee to The Yard. In subsequent years, the City’s percentage would increase to 5%.

Committee Member, Commissioner Joy Malakoff said, “I think that this could be a big money maker … It seems to me more money to be made by North Beach Yard than say our contracts with the Botanical Gardens and even the band shell.”

Committee Chair and champion of the project, Commissioner Ricky Arriola put the low rent into context. “Right now we have essentially vacant land that doesn’t generate anything … By bringing on an operator we are activating the neighborhood.” The concept has been “very well received by the North Beach community,” he said. “It’s a neighborhood enhancement … [as well] as a catalyst to get things going in the North Beach community.”

The operators have proposed contributing about $2.5 million to the venture via $1,155,000 in equity/investment debt financing, $750,000 to be privately funded by the individual operators, “and an optional $320,000 for sustainability/renewable energy systems which may be provided by private sponsors and phased into the project over the term of the agreement” according to a memo from City Manager Jimmy Morales. In addition, the operators would cover all operating expenses, including real estate taxes, insurance, maintenance costs, and utilities as well as design, permitting, and construction/installation costs of all temporary or permanent facilities.

The operators have requested the City contribute $750,000 for necessary infrastructure improvements.

Arriola said as a result of the substantial investment by North Beach Yard, “They’ll get a break on rent.” The City, he said, will benefit not only from the activation and future proceeds, but from resort tax and parking revenues as well. “Those projections are incredibly juicy,” he said. “They are eye popping. If this is as successful as we want it to be, it is very lucrative so this is money we are not getting today that we will be getting because of the North Beach Yard.”

Heiman and Lyon provided a worksheet that shows a five-year revenue projection and estimates of resort tax revenues calculated using actual revenues generated at The Wynwood Yard and revenue estimates based on “contemplated new business types” for North Beach Yard. It also includes estimates of new parking revenues from the City-owned parking lot to the South of the proposed site due to projected increases in daytime use and new nighttime use as a result of the evening activation. (The City would have to implement parking fees after 6 pm in North Beach.)

Based on the projections, the first year’s rent would be $1 but the City would collect an estimated $575,000 in additional resort and parking tax revenues. In year 2, the City would collect rent (based on percentage of proceeds) plus estimated resort and parking revenues totaling $653,133, on up to a projected total of $849,922 in year five. Full memo and projections here.

“In addition to the strong positive cash-flow for the [City of Miami Beach],” write Heiman and Lyon, “the proposed NBY will create over 30 small businesses, employ over 200 people daily, and serve the community in numerous ways (educational, fitness, entertainment, community building, etc.) which have never been contemplated on one singular location.”

The two Finance Committee members in attendance, Arriola and Malakoff, directed City Attorney Raul Aguila to negotiate a lease based on the financial terms as presented. (The third Committee member, Commissioner John Alemán is on vacation.)

Following the Committee’s direction on the financial terms, Aguila said he will work on terms that will address issues of concern to the community with regard to ensuring the cleanliness and general maintenance of the area as well as how to address potential noise and nuisance issues.

The proposed location for the pop-up food concept and community hub is on the West Lot on Collins Avenue between 81st and 82nd Streets. Aguila told the Committee that one issue that will need to be resolved is with regards to the North Beach Log Cabin, which currently sits on the site. The Committee voted at its last meeting to demolish the badly deteriorated structure but it has received a reprieve for further evaluation. “If we intend to comply with the lease timelines for opening up North Beach Yard,” he said, “we have to make a determination as to what to do with the Log Cabin on the site.”

Arriola said that from a timing perspective he wanted to separate the two projects as it “may take a while to determine how we fix [the Log Cabin] and where it fits in. I don’t want to see North Beach Yard slow down because of it.”

Silverstein passed along the recommendation of the Mayor’s North Beach Committee this week that the City further explore restoration options for the cabin but to not delay the progress of the North Beach Yard in the meantime.

In addition to the lease, the City Commission will need to approve amendments to the City’s Comprehensive Plan and Land Development Regulations to allow commercial use on the West Lots. Those amendments received a favorable recommendation from the Planning Board this week.